Faculty Commentary: The Business of Medical Marijuana

Mark A. R. Kleiman, professor of public policy, participated in a panel discussion on the business and politics of the booming medical marijuana business in California on KQED Radio’s “Forum” (July 24, 2009).

What is your sense of how the shifting political winds is changing the way policy makers are thinking about this question of what to do about it in terms of regulation and taxing it?

I think the policy discussion is lagging behind the changes in the real world. As the gentleman from AP pointed out we really don’t have any facts on this -- even as basic a fact as the volume. I don’t believe for a moment in the $16 billion production of cannabis in California, there’s nobody to smoke it. All those enforcement-based estimates always yield wildly inflated estimates. The total cannabis market in the U.S. is estimated at $10-15 billion. California might be an eighth of that so top dollar might be $2 billion. It can’t be more than that.

In looking at medical marijuana as a really good source of revenue -- is it overstated or is it realistic in terms of just how much revenue can be derived from that?

Of course. If you really thought that the market was $16 billion, then the board of equalization estimate (of California tax revenue) of $1.4 billion sounds more reasonable.

I think the board of equalization says they are already collecting $18 million.

That’s plausible, but again it’s a long way from $1.4 billion.

There have been a number of counties in California that have really resisted this, San Diego and San Bernardino among them and they’ve lost their court challenges and so I now believe they’re beginning to issue medical ID cards. But, how much diversity is there in California with regard to the accessibility of medical marijuana right now?

I’m not aware of any data on that. But, the reports I hear are that some of the rural counties, there’s still an active street market, and in some of the urban areas basically the dispensaries have taken over.

Los Angeles has had a different take on this. There’s been a huge proliferation of medical marijuana dispensaries down there. How many of them are there down in LA County?

I read the number 300. I have no basis for thinking if that is right or not, but they’re certainly ubiquitous.

The hundreds of dispensaries are medical marijuana, right?

That’s the question I want to raise. There are people buying from the strictly illicit market and there are people buying from the dispensaries. To assume that all of the people that are buying from the dispensaries are users of medical marijuana seems to me to stretch the language.